Environmental, Social & Governance Briefs

The Conference Board has developed a sustainable procurement framework to help companies assess their sustainable procurement program’s orientation toward outcomes and impact.

There has been dramatic growth in ESG (Environmental, Sustainability and Governance) investing during the past 20 years – but along with this positive trend comes an equally dramatic rise in ESG reporting requirements, and a proliferation of rating agencies and assessment tools.

Embedding sustainability into the supply chain makes good business sense. Embracing sustainable procurement practices can help companies manage business risks, achieve costs savings through material efficiency gains, enhance their brand reputation, and manage suppliers more effectively. But success requires a focus on real-world impact rather than inputs and activities.

California's new corporate board quota law marks the first time a U.S. state will mandate gender diversity. It will put pressure on companies to be more diverse. While it will most likely be challenged in court, companies potentially affected could begin managing internal targets for naming female directors and disclosing to stakeholders who can assess whether their intentions match their outcomes.

By pledging to increase Wells Fargo’s 2019 charitable contributions to 2 percent of after-tax profits, CEO Tim Sloan has set a high bar for community giving. In 2018, the company upped its giving to $400 million, a 40 percent increase over 2017, spurred somewhat by the announced tax reform. Wells Fargo is still an outlier: the top 25 percent of companies contribute a median of $55.3 million, according to Giving in Numbers, published by CECP in association with The Conference Board.

Even if the new gender diversity law is successfully challenged, the fact of it having been enacted by the State of California sends a strong signal. It is an important consideration for boards to incorporate in their board composition deliberations.

More than 70 percent of Americans believe the arts unify our communities regardless of age, race, and ethnicity and that the arts help them understand other cultures better, indicating the importance of the sector to individuals and the companies that employ them. Overwhelmingly, people also believe that the arts are a part of a well-rounded education. Companies looking to create meaningful social impact for their communities need to be working with the arts in a variety of ways.

President Trump’s proposal to change financial reporting to every six months from quarterly and Sen. Elizabeth Warren’s American Capitalism Act are two examples of how Washington puts forth “slapdash” efforts instead of wholistic ones to address governance issues.

Nearly half of Americans believe CEOs can influence the government, although that doesn't necessarily mean the country thinks CEOs should speak out about social issues. Americans are split on whether company leaders should try to use their influence in the public domain, but doing so could benefit the business, since nearly half of the country would be more likely to purchase from a company whose CEO has taken a stance on an issue that they agree with.

With, among other things, the embrace of corporate purpose, ESG, and long-term investment strategy by BlackRock, State Street and Vanguard; the adoption and promotion by the World Economic Forum of The New Paradigm; and the introduction of legislation by Senator Warren to achieve stakeholder corporate governance by way of mandatory federal incorporation, it is clear that we are at a new inflection point in the development of corporate governance.